Second quarter sales increased 16% to a record $4.9 million. Fiscal six month 2010 sales were 17% ahead of 2009. Branded product sales represented approximately 75% of the overall sales increases.

Gross profit was 24% of sales during the quarter and 25% for the six month period, as compared to 26% in 2009.

Operating expenses decreased during both the second quarter and six month periods in 2010 as compared to 2009.

EBITDA income for the second quarter 2010 was $209,000, as compared to a loss of $488,000 in the second quarter of 2009. For the six month period, EBITDA income was $414,000, as compared to a loss of $483,000 in the prior year period. (See EBITDA table at end of this release for further non-GAAP information).

Net loss for the quarter narrowed sharply to $164,000, compared to net loss of $873,000 during 2009.

Working capital increased by approximately $370,000 during the quarter to $2.4 million.

Cash was $1.1 million at June 30, 2010, as compared to $1.3 million at December 31, 2009.Â Additionally, there was $206,000 available on the revolving line of credit at June 30, 2010.

Second Quarter Developmental Highlights:

Reached fourth private label agreement with a national wholesale grocer.

Began shipment of selected Reed’s and Virgil’s brands to all Fresh & Easy locations.

New Distribution agreement in South Korea.

Expanded branded product sales in Canada, primarily to Quality Foods.

Meijer Stores agreed to carry selected Reed’s and Virgil’s brands in all of its stores.

“Our positive results reflect the payoff from all the hard work of our seasoned sales team over the past year, as we gained a stronger foothold in mainstream grocery stores,”saidChris Reed, Founder, Chairman and CEO of Reed’s, Inc. “We achieved record second quarter revenues, driven primarily by increasing sales of our branded products, which we anticipate will continue for the balance of the year. Sales of all our brands continue to outpace last year. We have a very active private label program and expect to land a number of additional national accounts soon. This aspect of our business has not yet had a significant impact on our financials. We expect increasing sales of our private label products as we go into the third and fourth quarters.Â In addition, we will be introducing new diet sodas shortly, and we have several other new exciting product lines in development.” Added Mr. Reed, “Our basket of goods is expanding and improving, and we have the talent to execute our vision.Â We plan to continue our double-digit growth rates and accelerate into 2011.”

Reed’s Chief Financial Officer, Jim Linesch, commented, “We’ve held our operating costs low while increasing our revenues, indicating the scalability of our business.Â Our organization is nimble and opportunistic, taking full advantage of dynamic changes in the marketplace.Â Â The Company is adequately capitalized to execute the new business initiatives that are currently on our plate.Â We plan to finance our current growth through internally-generated funds, unless we have a super opportunity that needs additional financing.Â We took a little hit to our margins in Q2, as a percent of sales, primarily due to overhead costs as we improve and document our plant procedures for food quality and safety.Â Our direct margins on products sold, however, remained constant from last year despite a very competitive environment.”

Added Mr. Linesch, “EBITDA income in 2010 exceeded interest expense during both the three and six month periods, indicating the positive contribution made to working capital from our operations. As we proceed into Q3, we have experienced record sales for July and a strong backlog going into August.”

To see financial statements and EBITDA schedule please log in to Reed’s website at www.reedsinc.com.

Conference Call

The Company will conduct a conference call at 4:15 p.m. Eastern Daylight Time on Tuesday, August 10, 2010 to discuss its second quarter 2010 results. To participate in the call, please dial the following number five to ten minutes prior to the scheduled call time: 888-240-4700. International callers should dial 512-225-9559. The conference ID for this call is 936603#.